Reengineering Medical Product Innovation

Jul 3, 2014, 9:00 AM, Posted by Arthur Kellermann

Arthur Kellermann, MD, MPH, an alumnus of the Robert Wood Johnson Foundation (RWJF) Clinical Scholars and Health Policy Fellows programs, is professor and dean of the F. Edward Hébert School of Medicine, Uniformed Services University of the Health Sciences, Bethesda, MD. He is co-author of the new RAND report, “Redirecting Innovation in U.S. Health Care: Options to Decrease Spending and Increase Value.” Here, he shares recommendations for a brave new world of medical technology.

Arthur Kellermann, MD, MPH Arthur Kellermann, MD, MPH

Americans take justifiable pride in our capacity for innovation. From putting the first men on the moon to developing the Internet, we lead the world in developing innovative technologies. Health care is no exception. The United States holds more Nobel prizes in medicine than any other nation.

Novel drugs, biologics, diagnostics, and medical devices have transformed American health care, but not always for the better.

Some innovations have made a big difference. Combination antiretroviral therapy changed HIV infection from a death sentence to a treatable, chronic disease. Before an effective vaccine was developed, Hemophilus Influenze type b, a bacterial disease, was a major cause of death and mental disability in young children. Today, it is virtually eradicated here and in Western Europe.

"What if the policy landscape was changed to promote and reward high value ideas?"

Unfortunately, other health care technologies in widespread use today have driven health care costs higher while doing relatively little or nothing to improve health. For this reason, what Americans get for their health care dollar falls short of its potential.

In most parts of the economy, such as manufacturing, retail sales, computing and telecommunications, innovation boosts productivity and lowers costs. But in health care, the opposite is true. Many groups, from the Kaiser Family Foundation to the Congressional Budget Office, have noted that the introduction of costly new drugs, diagnostics, devices, and clinical procedures is one of the biggest factors driving the relentless growth of health care spending.

Health care behaves differently because inventors, investors, and developers face a very different investment and regulatory landscape from that confronted by other industries. As a result, inventors have weak or even negative incentives to create products that improve health and lower costs. The biggest payoffs come from creating products that can command high prices, whether or not they make a substantial impact on health.

Consider one such example: substantial data indicate that a cardiovascular “polypill” that combines low doses of three generic blood pressure medications and a statin in a single pill could produce a simple, affordable, and near-universal way for adults to reduce their risk of suffering a major heart attack or stroke, two of the biggest causes of death and disability worldwide. Epidemiological studies and limited clinical trials suggest that widespread use of the polypill could reduce the incidence of these deadly diseases by 50 percent or more.

Given the prospect of such enormous benefit, one might think that developers and investors would rush to bring this concept to market. But 10 years after the concept of a polypill was first described, it’s made little progress. Why? Although every ingredient of the polypill has been approved by the Food and Drug Administration (FDA) and doctors can and sometimes do prescribe these medications together, putting them into a single pill is not approved for the U.S. market. And given the low price point of this treatment, investors have determined that they would be unlikely to recoup the costs of mounting the sort of large-scale clinical trials required to secure FDA approval.

As long as the marketplace discourages the creation and testing of cost-lowering innovations, there’s little reason to think that inventors will focus their creative talents in this direction. But what if the policy landscape was changed to promote and reward high value ideas?

Recently, with support from the Bill and Melinda Gates Foundation, a team of researchers from the RAND Corporation examined this question. They synthesized information from scientific, trade, and popular literature; conducted interviews with more than 50 inventors, venture capitalists, CEOs, and health policy experts, and consulted a panel of distinguished experts in policy and product innovation. With the help of a talented group of Robert Wood Johnson Clinical Scholars, they also assembled a set of case studies that illustrate how the development of drugs, devices, tests, and health IT are influenced by the current innovation pathway. Ultimately, the team generated ten policy options, shared in the brief, Healing Medical Product Innovation, to alter the prevailing mix of incentives in ways that could encourage the creation and development of high-value, cost-lowering health care technology:

  1. More creativity in funding basic science.
  2. Offer prizes for inventions.
  3. Buy out patents.
  4. Establish a public-interest investment fund.
  5. Expedite FDA reviews and approvals for technologies that decrease spending.
  6. Reform Medicare payment policies.
  7. Reform Medicare coverage policies.
  8. Coordinate FDA and Centers for Medicare & Medicaid (CMS) processes.
  9. Increase demand for technologies that decrease spending.
  10. Produce more, and more timely, technology assessments.

Several of RAND’s policy options seek to reduce the risks and regulatory barriers associated with bringing cost-lowering products to market. Others seek to alter market signals by encouraging health care providers to favor highly effective cost-lowering technologies over products that are no better but boost costs. Adopted in whole or in part, policies like these could incentivize American inventors, investors, and developers to focus their creative energies toward devising health care technologies that produce better heath at lower cost.

Because the prevailing regulatory and reimbursement landscape is oriented to reward developers who create ever-costlier products; we should not be surprised that they do.  Rather than allowing growing numbers of Americans to be priced out of the health care market, or forcing tax payers and policyholders to underwrite increasingly unaffordable products, policy-makers should consider realigning  the playing field in ways that would encourage inventors and developers to create high-impact, cost-lowering technologies.  If they do that, American ingenuity and competition will do the rest.

The views expressed are those of the authors and do not reflect the opinions of the Uniformed Services University of the Health Sciences, the Department of Defense or the U.S. Government.

This commentary originally appeared on the RWJF Human Capital Blog. The views and opinions expressed here are those of the authors.